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The best company vacation policy

VacationQuick note here before I jump in to remind you that I’m not your lawyer (in fact I’m not a lawyer at all). I’m not offering legal advice. You have your own lawyer for that…

I’ve seen all sorts of variations on vacation policies over the years (some harsh, some that famously pay you to take time off and everything in between). And I’ve come to a conclusion on the best PTO and vacation policy: none.

Of course I’m not suggesting that you not let employee take time off, nor am I suggesting that you not have a formal policy. But after seeing all the variations – and importantly have had to unwind companies with various PTO policies – I think the best practice is to have a formal policy of not having a formal policy. In such a plan employees don’t have a set number of days that they can take off; there’s no difference between a day you take off to go to the doctor or sit on the beach; there’s no need to track days off; there’s just an agreement between the company and employees that they’ll take time off appropriately (and after checking with their manager). Here are a few reasons why I like the “no policy” policy:

- There’s no need to track days. In my experience most companies do a horrible job of tracking employees vacation usage. Having a policy of not having a policy eliminates the need for this. There’s also no difference between a sick day a personal day and a vacation day. They’re all just days out of the office.

There’s no vacation accrual. As a result of not tracking vacation days, there’s no vacation accrual (which is inevitably wrong – see bullet 1 above). Vacation accruals in my experience turn into a perverse – and often unearned – “bonus” when employees leave a company. And they’re a huge pain to deal with if things turn south. But most importantly I think they set up the wrong incentive/expectation. Companies shouldn’t put employees in the position of choosing between the monetary value of time off and actually taking time off. Companies have vacation policies because employees who take vacations are better employees (this is at the heart of FullContact’s paid paid vacation policy that I referred to above). The value of vacation is the actual vacation, not in some artificial bank account that grows as you grow more miserable in your job.

It’s better for employees. It’s good for people to get out of the office once in a while, for sure. But the other benefit of having a no policy policy is that you’re saying to your employees that you trust them to make good decisions. You’re empowering employees and managers to do their jobs and to manage their time off appropriately. That’s a powerful message to send to the people who work for you.

It’s easier. For all the reasons above, not having a formal policy is simply easier. There’s no tracking, no accounting, no paperwork.

The vast majority of the companies I work with have formal vacation and PTO policies (this includes Foundry Group itself, actually). But a few don’t (as is true at many other companies I know) and I think that’s best.

Would love to hear your thoughts on this.

July 15th, 2013     Categories: General Business    
  • http://blogme.dium.com dgmandell

    We have that exact policy here at PivotDesk. The keys to that policy are respect and communication. You have to respect people’s ability to make judgement calls around what’s appropriate and what isn’t, and you need to be very clear when you communicate how people are doing against goals.

    It goes a long way when employees know that you, as a business, respect their ability to make the right decisions.

    • http://www.sethlevine.com sethlevine

      Strongly agree Dave. And am glad you posted this!

  • http://vitter.tumblr.com Geoffrey Vitt

    Started @twitter (has your recommended policy) after ~6 years @google (generous but accrual based) and as an employee and manager I love working in the new policy. Enables people to take longer/healthier vacations and not have to worry about needing a random day off here and there.

    As a friend to a lot of people starting companies I’ve also been evangelizing like crazy.

  • Dave

    Pretty much all the companies I’ve asked about this (not a statistically valid sample) have some sort of “expectation” of how much time people can/should/will take off per year. So really it’s just a way to avoid the liability and the tracking. It doesn’t really seem empowering to me – it’s a lot like telling people they can wear as much or little flair as they want, but then calling them out on it if they don’t want to wear much flair.

    • http://www.sethlevine.com sethlevine

      Some part of this is clearly to avoid liability (and in my experience really a double liability since people take at least some of their vacation but very few companies actually track it accurately enough to avoid paying out for time already taken in the end).

      I appreciate the “Office Space” reference. And I’m sure a boss like Lumbergh would screw it up. But done well (and combined with a management and culture that values outcome and not face time) it really does work.

  • oilburner

    Having worked in this policy I think it has good sides and bad. It’s a great policy but requires the (oftentimes missing) bi-lateral part to make it work. Just like corporate culture, it is incumbent upon managers/executives to make sure this workplace necessity is being utilized by all employees equitably. And it has to be actions, not words. For employees expected to be available every weekend, it is hard for them to see _how_ they can take a week off. Managers have to be self-realized enough to realize this contradiction and encourage the behavior.

    Likewise, at the executive level there has to be some recognition of equalization amongst teams/employees or it gets to be recognized as an exploitive tool for haves and have-nots. Marketing with a stern boss might look jealously at devops with a lenient boss and feel trapped by real or perceived politics. And with a lacking explicit policy, it can be a very destructive device in poorly-communicated cultures.

    • http://www.sethlevine.com sethlevine

      It clearly places an emphasis on mangement (and should start at the CEO level by way of example – both by the vacation that s/he takes and by how they mange their own reports to this policy).

  • http://fullcontact.com/ Bart Lorang

    We’re actually experimenting with this policy at FullContact with our exec team and originally considered it as part of Paid, PAID Vacation. I decided against the policy a year ago because studies have shown that people actually take 2 days LESS vacation when they have an “unlimited vacation” policy. It’s a bit like the speed limit in Montana. For awhile, it was an “unlimited” speed limit, but people (and the cops) wanted a number so they made it 75.

    Now that we’ve had a couple years worth of audits, which always results in the fun ‘accrued PTO’ on the balance sheet, I’m leaning towards employing the “unlimited” policy across the board. It’s worked quite well for our exec team. I just want to make sure that people take enough vacation! There’s a reason weekends and vacations were invented after all – mostly so I can catch up on email ;-)

  • kipsteele

    A formal vacation policy is for people I don’t want to work with. It pisses me off to no end that if I have someone that comes in mid year this magical HR policy would not allow them to get paid time off. While it does work as a CYA for slackers, so does firing people for doing mediocre work, I have to think that you can instll some semblance of “don’t mistake my generosity for weakness remediation plan” that you don’ need to police this too much. One of the ways that I retained some great staff is by giving them an extra couple of days here and there. This plus working from home and paying for a cell phone got me great employees. You can’t battle every day and need to prepare for going 12 rounds. I want my teams to take vacations and I’d like to take some as well.

  • http://gplus.to/mrgenixus Benjamin West

    I find the ‘No Policy’ policy a double edged sword, as an employee:

    1) If I take a lot of vacation, it would probably be better for me, and would help me keep my work/life balance in-check

    2) I worry that I will take vacation when I am needed, and so I don’t do #1.

    The best experience I have had with this is: I was on salary with a company with a set vacation policy, and I pointed out (before going to salary) that I was inclined to stay hourly because the policy for hourly employees allowed me to ski Mondays in the winter. When I went on salary, it was because my supervisor pointed out that he was responsible for how many hours I worked, and that as long as we were meeting goals, as a team, he didn’t see why I couldn’t ski on Mondays ( or Thursdays, or any other day of the week). Basically, I find the idea of ‘strict policy’ vs. ‘no policy’ a sort of nascent perspective.

    I think there are better, more innovative ways to do vacation, and I think the key to making any of them work is being flexible and working with employees so that they have what they need, and empowering supervisors (like mine) to make the call.

    Oh, and also, suggesting that a new hire SHOULD take a vacation at (for example) 90,180,162 days allows someone to have a better idea of when they can feel that it would be ok.

    • http://www.sethlevine.com sethlevine

      I agree that this is key Bart. The point of having a vacation policy is to encourage people to take time off. And the point of having “unlimited” vacation isn’t to guilt people into taking less time away – it’s to free them (and the company up) from the administrative burden of PTO and to treat people like adults. I have now doubt that you’ll come up with some creative way to encourage people to take their time off!

  • http://www.coefficientinc.com/product sbmiller5

    Thanks for the post Seth. We have unlimited vacation policy for the reasons you discussed (employee empowerment/trust & less admin burden). But as a number of people have pointed out in the comments, employees have a habit of taking less vacation with an unlimited policy.

    We’ve done a couple things to help mitigate this:
    1) Mandatory weeklong vacation: Each employee is required to take at least one full week of vacation each year. This is the only thing we track (informally). **Note: I’d love to move to the PAID paid vacation, when we can afford it.

    2) “We reserve the right to force you to take vacation.” It will take a concerted effort to make this scale, but we informally monitor vacation and burnout and will both suggest employees take a long weekend or actually force them to take time off.

    3) Lead by example: As Founders it’s hard to stop working on your baby. But just as it’s important for employees to take time off and re-charge, it’s just as important for Founders. Time off and recharging has shown to have a net gain in productivity. We are accountable to each other and will make each other take vacation if it get’s to that point. By showing that we take time off, it encourages employees to do it, as well.

    • http://www.sethlevine.com sethlevine

      smart scott. i was actually not familiar with the research on this but i think that there are ways around it (as you point out). the idea isn’t to duke employees into not taking time off – it’s the opposite!

  • Matthew Daniel Brodsky

    Completely ridiculous idea. I know your type Seth. Like your Silicon Valley brethren you live the life of Riley but you make sure that the blue collar workers get paid shit. Compared to countries like Germany and Switzerland (I happen to live in Geneva), America’s vacation policy is horrible. MANDATORY paid vacation in Switzerland is at least five weeks and in Germany the same thing. There’s a reason it’s MANDATORY.

    That way companies can’t erode worker’s rights like you are suggesting by surreptitiously offering that worker’s take the vacation time they ‘deem’ necessary. But of course in our economic environment, where worker’s aren’t assured of anything anymore (especially pensions) they are going to take a very low amount. On the surface, you’re idea seems so benign and sweet but underneath it’s really just a way of making sure that workers tow the line and take very little vacation.

    And your comment was hilarious: ‘Of course I’m not suggesting that you not let employee take time off, nor am I suggesting that you not have a formal policy.’ Oh, you really are so magnanimous, I’m so relieved that you weren’t suggesting that companies don’t let their employees take ANY time off. How wonderfully sweet of you.

    But then again, what can you expect from a Peter Thiel type venture capitalist (that’s what your Foundy group does right? You take brilliant the ideas of brilliant scientists and engineers and you make a profit off of them even though you don’t have the sheer brilliance of an Oppenheimer or a Jonas Salk). But America loves its’ entrepreneurs.

    Let me tell you something, my brother has been working as manager in one of David Burke’s restaurants in NYC. I kid you not when I tell you that he has had about a week of vacation in two years. That is an example of how American society has failed its workers. By eliminating mandatory vacation it’s great for the bottom line but not for the workers. That is why Nordic countries make sure that workers have paid vacation.

    I wonder if you really believe in what you are proposing or if deep down you know that you what you are suggesting is a way of increasing profits for companies. But what can you expect from the upper middle class (I’m assuming that’s what you are) ‘elite’ who support thing like gay rights and locally grown vegetables but at the same time do everything in their power to exploit the workers they hire or work with.

    Have fun in your nice little leave it to beaver suburb in Colorado where you don’t have to be close to the working class hordes. See ya later alligator.